Why Reducing Law School Debt Will Not Increase Public Interest Work

Deans and administrators often say that reducing student debt will allow more graduates to take public interest jobs. That is not really so, however, as I explain in this post on the Academe Blog:

Why Reducing Law School Debt Will Not Increase Public Interest Work

BY STEVEN LUBET

When the University of Alabama returned over $21 million to its largest-ever single donor, and removed his name from its law school, it either was or wasn’t because of his outspoken opposition to the state’s ultra-restrictive new abortion law. According to Hugh Culverhouse, Jr., “the administrators at the university [chose] zealotry over the well-being of its own students” in retribution for his support for an ACLU lawsuit against the state, and especially his call for a student boycott as long as the abortion statute remained on the books. The university tells a different story, stating that the dispute had instead been over Culverhouse’s attempted interference in academic matters, including “numerous demands about the operations of the University of Alabama School of Law.”

Writing recently in the Washington Post, University of Alabama law professor Ronald Krotoszynski provided some details. Without taking sides in the larger dispute, Krotoszynski confirms that Culverhouse “was insisting on Alabama significantly increasing the law school’s entering class size,” which, Krotoszynski explains, would have been a very bad idea.

“Class size has a direct, and inverse, relationship to employment outcomes for graduates,” Krotoszysnki explained, and the current job market – only now recovering from the crash of 2008 – dictates that Alabama keep its entering classes relatively small. And there are further obvious benefits such as fostering an intimate learning atmosphere and, of course, maintaining student quality.

Krotoszysnki makes an additional point, however, which I think is mistaken:

Rather than pushing for law schools to enroll more students, it would be better if would-be donors facilitated public-interest career paths by making it possible for current law students to graduate with lower debt loads. Taking this step would permit more newly minted lawyers to take positions that involve providing legal services to chronically underserved communities desperately in need of them.

I am all in favor of reducing student debt loads. But that is not likely to result in more students taking “lower-paying jobs as prosecutors and public defenders, and with state and federal agencies,” simply because the number of such jobs is relatively fixed and there are already more applicants than slots. So even if more graduates are able to enter public interest work, the number of jobs is not going to expand to accommodate them.

Krotoszynski is not the only one to make this claim, of course. It is a staple among educators and deans, but that doesn’t make it right. An economist colleague of mine explained it this way:

An economist would think of this as a shift outward in the labor supply curve (which is usually thought of as upward-sloping). Indebtedness goes down, and the hypothesized response is that at every wage level, there are more people willing to work as public-interest lawyers.

But what about the labor-demand side? I would say that there’s no reason to believe that labor demand would shift at all. Why would it? If labor demand does not shift, then the increase in labor supply just moves us along the labor demand curve.

And there could then be unintended consequences:

A outward shift in supply means that supply and demand cross at a new equlibrium: with a lower wage and a larger number of people employed as public-interest lawyers. So there might be more public interest lawyers, but it would be even less remunerative, which is exactly what the shift outward in labor supply means: there are more people would be willing to work at a lower wage. In this case, that willingness comes from carrying less debt.

Of course, a reduction in debt burdens might result in different lawyers taking public interest jobs – as the newly debt-free lawyers enter the competition for the limited spots as public defenders, prosecutors, and legal services attorneys – but that doesn’t mean the public will be better served. I am not aware of any correlation between indebtedness and quality, and I doubt that one could ever be shown. Given an inelastic supply of jobs, every applicant hired – no matter how indebted she is or isn’t – will just displace someone else.

The “less debt means more public interest” meme is attractive but inaccurate. In over four decades in academics (and a couple of years in legal services before that), I have never known a public interest job to remain empty because there was no one to take it.

Law students are carrying too much debt, which law schools should address in every way possible, even though that will not increase the number of public interest lawyers.

Public interest jobs are underfunded and too few, which is a separate issue. At the risk of sounding like a Republican, the solution to that problem is on the supply side. And at the risk of sounding even more like a Republican, the real need is for more job creators. Perhaps Mr. Culverhouse could use his $21.5 million to open a new legal services office dedicated to abortion rights. They could surely use one in Alabama.

Comments

[Andrew Perlman]

Great post, Steve. I agree with much of what you say, especially your point that a reduction in student debt will not result in more legal aid lawyers. I make a similar point in this short article in Daedalus (which was part of a larger issue focused on access to justice): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3311752

My one quibble is that I think that a reduction in student debt might help to improve the public's access to legal services and information in ways that are unrelated to the supply of legal aid jobs. For example, as I argue in the Daedalus piece, lawyers in private practice might be able to reduce the cost of their services in a financially sustainable way if they have less debt. To be sure, there are other and more effective ways for law schools to improve access to legal services (I highlight some ideas in the piece), but student debt is part of the answer, albeit not in the way that most people assume.

[Steve L.]

Thanks, Andy. I liked your article. It is not obvious, though, that lawyers would reduce their fees if they carried less debt. For lawyers already in private practice, it seems more likely that they would just keep what amount to the extra money.

I don't think lawyers lower their fees when the stock market goes up (that is, when they have more disposable income, as would also happen with less indebtedness).

Services are usually (though not always) marketed at the highest rate buyers are willing to pay, which would not change if law grads carried less debt. Maybe there would be some slight amount of fee lowering, but I have to doubt whether it would be enough to significantly reduce the cost of legal services.

[Andrew M Perlman]

Thanks, Steve. I agree that lawyers are likely to pocket most of the cost savings from lower student debt, and I make a similar point in my piece. Having said that, I do think lower student debt would make a difference on the margins in terms of prices and affordability (e.g., a willingness to offer more pro bono or low bono work). To be sure, the effect is unlikely to be large. My only point is that I don't think we can say that student debt has no effect on the profession's ability to provide more affordable access to legal services and information.

[Greg Crespi]

Here is a follow-up SSRN article on the 99% denial rate that should be of interest to many readers of this post:

Crespi, Gregory S., Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change? (June 17, 2019). Available at SSRN: https://ssrn.com/abstract=3397656 or http://dx.doi.org/10.2139/ssrn.3397656

[Joan Howarth]

Yes to much of this. But I do not agree that the clients of public interest agencies have no interest in which lawyers have the financial ability to take, for example, legal services and public defender positions. You say there's no relationship between indebtedness and quality. I suspect we do not know how to measure quality sufficiently to address that question. But, as Aaron Taylor shows, law school debt is not racially neutral. One of the many reasons law schools should work to lower their graduates' debt is that low-income clients deserve a broader range of attorneys representing them, not just those who managed, sometimes because of greater resources, to graduate with less debt.

[Steve L.]

Joan Howarth: Your are right; thanks for pointing that out.

[Jennifer Brobst]

While I agree that public interest positions are in demand in more populous regions, if you head to more rural regions where quite a few law schools are situated, you will see a different picture in my experience, which is in the South and the Midwest. Here, there are public interest positions, including traditional legal aid positions, for which recruitment is a struggle for employers. State government legal positions in the criminal justice system appear to receive a somewhat steady flow of interest, but nothing like what is described in the blogpost. I do know many students with serious student debt who also have family obligations and cannot afford lower attorney salaries. There is living lean and there is impossible. Even if they could, many graduating law students, even those with close family ties to lower income, geographically isolated regions in the country, do not intend to remain and serve their communities. I am quite sure that if they could be more financially successful closer to "home" they would remain.
Despite these struggles with hiring, the quality of public interest legal services remains high in rural areas because those who do remain are so dedicated and stay until retirement. I speak only from experience, but the author also relied on experience, so it seemed appropriate to weigh in.

[Greg Crespi]

Think about this PSLF point: a typical law student with $150,000 in combined undergrad and law school debt who takes a typical public service job covered by the PSLF program will have, after 10 years of negative amortization under the PAYE repayment plan, about $200,000 of debt that is forgiven, tax-free. That's essentially an extra $20,000/year in after-tax income, which is like another $25,000/year before taxes! That wonderful deal now makes an interesting and satisfying $50,000/year public service job a possible option for many people who could otherwise not afford to take it. Which, unfortunately, is making the rather fixed and limited number of such public service legal positions highly competitive. Our SMU grads are now literally swamping the local DA's offices with applications, more than they can hire. The PSLF program badly needs part two now: serious increases in federal and state support for public interest legal services like legal aid clinics, public defender offices, asylum clinics, etc., etc. I guess that I am still living in the late-1960's.